Bank of Tanzania now takes over terror-linked FBME bank

Technicians making final touch ups at an FBME bank branch in Dar es Salaam. A report from the US Treasury says FBME Bank has been linked to many high risk transactions, including one involving a Hezbollah financier. Photo/LEONARD MAGOMBA 

By CHRISTOPHER KIDANKA

In Summary

• Bank of Tanzania has taken over the operations of FBME Bank, but operations to continue.
• US Treasury notice indicated FBME was a financial institution of ‘primary money laundering concern’.
• By the end of 2013, FBME Bank had assets in Tanzania valued at $256 million (TSh431 billion).

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• Tanzania takes over FBME bank after Cypriot laundering crisis

The Bank of Tanzania has taken over the operations of FBME Bank less than a week after declaring it had no intention of doing so.

Last week, BoT said it was investigating the bank after the United States Treasury Department linked it to money laundering and financing terrorism. 

 

A report from the US Treasury says the bank has been linked to many high risk deals, including one involving a Hezbollah financier.

Through its Director of Financial Crimes Enforcement Network (FinCEN), Ms Jennifer Shasky Calvery, the US Treasury had issued a detailed dossier about $875 million (TSh147 billion) of “shady” financial transactions. At the current exchange rate, $1 sells for TSh1,680.

On Friday July 18, the Central Bank of Cyprus took over the management and operations of the bank’s branch in that country following the issuance of the US Treasury notice of findings indicating that FBME was a financial institution of ‘primary money laundering concern’. According to a report published by a Lebanese premier English paper, The Daily Star, the Cypriot central bank is now looking for buyers to buy FBME assets valued at $2 million.

READ: Tanzanian bank denies money laundering (Business Daily).

Headquartered in Tanzania, the bank conducts 90 per cent of its operations in Cyprus. It was previously headquartered in the Cayman Islands and has two branches in Cyprus and four in Tanzania.

Data from the BoT show that by the end of 2013, FBME Bank had assets in Tanzania valued at $256 million (TSh431 billion).

“In view of the decision taken by the CBC to take over FBME’s bank branch in Cyprus and the effects this may have on the banking system in Tanzania, the Bank of Tanzania in accordance with the provisions of the Banking and Financial Institutions Act 2006 has taken over the management and operations of FBME Bank Tanzania effective July 24,” the BoT statement read in part.

READ: Tanzania 'will not close' bank blacklisted by the US.

The BoT statement adds operations at the bank will continue smoothly.

FinCEN’s dossier claimed “FBME has a significant number of shell company customers nominally based in Cyprus and in other high-risk jurisdictions”. Wire transfers related to shell company activities accounted for hundreds of million of dollars of the bank’s transactions between 2006 and 2014.

According to the dossier, FBME was involved in at least 4,500 suspicious transfers through US correspondent accounts that totaled at least $875 million between November 2006 and March 2013.

FBME Bank was established in 1982 in Cyprus, operating as a subsidiary of the Federal Bank of Lebanon SAL. In 1986, it changed its country of incorporation to the Cayman Islands and its banking presence in Cyprus was transformed to that of a branch of the Cayman Islands entity. In 1993, FBME Bank established a Representative Office in Moscow.

READ: Inside the secretive world of the Lebanese-owned FBME Bank.